The Advantage Blog

How to Avoid Compiling Huge Student Debt

The Class of 2016 just graduated with an average student loan debt of $37, 172, up six percent from last year.

This means that for the next 10 years these individuals will be paying over $400 a month to repay their loans.

Student debt impacts new graduates in a number of ways. It often means living at home, having roommates, not buying a new car, delaying marriage, or purchasing a home. Not managing your student loan debt well can also impact your credit rating, making long term purchases more difficult.

So how can you avoid taking out student loans, or at least minimizing them? Here are some steps that can help.

Grants and Scholarships
Money that does not require repayment and charge interest is the best option for college funding. This includes grants and scholarships.

Grants are often awarded on need, or for those in a specific field of study. Scholarships are available for students with and without perfect GPA’s. Search diligently for grants and scholarships even though the application process can be time consuming.

Military Service Funds
Veterans and dependents of veterans have multiple options for free money for college. For those on active duty tuition assistance is available. For those out of the service, the GI Bill provides 36 months of education benefits, which can be passed down to dependents.

Employer Tuition Reimbursement
It is estimated that 60% of employers offer some form of tuition reimbursement. This often means balancing work and school, but getting financial support while going to school part time can make it worth it.

Get a Job
Finding part time work to help offset expenses can be a big plus. An ideal job would allow for flexible, and not too late, hours, offers a decent wage, and has a positive work environment. Apply for a paid internship. There is nothing like being paid to get experience in your field of study.

Keep Tuition Costs Low
Going to that prestigious out-of-state college can sound great until you see what out-of-state tuition costs will be. Unless that school gives you a significant advantage in your field of study, it is almost always better, and certainly less expensive to go to an in-state school.

High school students can take Advanced Placement (AP) or International Baccalaureate (IB) classes for college credit. Students can also take dual enrollment courses that give both high school and college credits. Both approaches reduce the number of classes required in college and can shorten the time needed to obtain a degree.

As a college student you can take college level exams to receive credit without having to take the class. Students should also maximize the number of classes they take that are included in their semester fees. Many colleges charge a flat tuition fee for up to 5 – 6 classes. If practical take as many classes in a semester/quarter as possible. Finally, take general education classes, i.e. English, math, history, at a local community college. Just make sure the credits transfer to your chosen college.

Keep Your Expenses LowStart by avoiding using credit cards. Credit cards can be great in an emergency, but they can also be very tempting, especially when you want to buy that pizza or go out for a night on the town.

Try leaving your car at home.
This eliminates expenses such as gas, car insurance, parking passes, parking tickets and maintenance. Use the bus which can be more convenient and affordable.

Watch what you spend on rent.Lower your rent by having multiple roommates, pay attention to your utility costs, and live at home, if you can for the first year or two.

Reduce food expenses.Eating out for most of your meals is another big drain on your budget. It is also harder to have a healthy diet if cheaper fast food options are your choices. Opt to cook your own meals, and when you do cook, prepare extra so you can quickly grab a bite when you are in a hurry. Also don’t waste meals on your meal plan. They are prepaid, so use them. Use coupons from your favorite restaurants.

Reduce academic expenses.Lower your book expenses by buying used books and renting really expensive books. Purchase your books from classmates who just finished the class, and resell your books at the end of the semester.

The Final Assessment
With today’s heavy push to secure a college degree combined with the rapidly-increasing cost of college, families are facing one of the toughest decisions of their lives: How to pay for college without being buried in student loan debt? With some planning (see below) and judicious use of available resources, reducing the total college bill can be done.

529 Plans Make College Financing EasierPutting money away ahead of time to finance a student’s college education is a great way to prepare for future expenses. 529 Plans offer a number of ways to save and receive tax benefits.

Funds in 529 plans can be used at any eligible two- or four-year college, vocational/technical school, or graduate school around the country.

Anyone can contribute to the plan, the beneficiary can be any age and live in any state, and you can participate in the plan regardless of your income level.

If a child decides not to attend college or earns a scholarship, the money can be redirected to another family member simply by changing the beneficiary.

Earnings grow tax deferred and your qualified withdrawals are tax-free from federal taxes and may also be free from state taxes. A 20% tax credit on up to $5,000 per year in contributions to an Indiana529 plan can be claimed against Indiana income tax (maximum yearly credit is $1,000).

We’re There When You Need Us
While we at The Mitchell Agency want to assist in all facets of your life, don’t forget, to give one of our team members a shout should you need assistance with your insurance.

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